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(Bloomberg) — UniCredit SpA Chief Executive Officer Andrea Orcel, who’s pursuing a potential takeover of German rival Commerzbank AG, said Europe’s banks aren’t large enough to cover the bloc’s funding needs.
“Europe needs bigger, stronger banks to underpin our industry,” Orcel said at an event in Milan on Tuesday. “Without pan-EU champions, our bloc will never achieve its ambitions, nor will it overcome the growth challenges” that experts have highlighted, he said.
UniCredit has recently amassed a 21% holding in Commerzbank and Orcel has said a full takeover is an option. He has billed his approach as a “test case for Europe.”
The move has triggered frustration within the German government, which still owns 12% in Commerzbank. Milan-based UniCredit bought a 4.5% stake in a government placement last month that was addressed at financial investors, and it obtained much of the remaining holding through derivatives.
German Finance Minister Christian Lindner said at an event on Monday that he would have preferred the government stake to be sold “into so-called free float.” He also said that “the approach adopted by the Milanese has irritated me.”
Outside of Germany, however, most stakeholders have reacted more positively.
Several Italian government officials have said that an acquisition of Commerzbank by its competitor would be in line with European Union goals to break down barriers to the flow of goods and services across borders.
Earlier on Tuesday, BlackRock Inc CEO Larry Fink called for more European integration in response to a question about UniCredit and Commerzbank. The US firm is UniCredit’s largest and Commerzbank’s third-largest investor.
“Europe needs a stronger capital markets system and it needs a more unified banking system,” Fink said in a Bloomberg TV interview at a Berlin conference. He declined to comment on the specific case of a potential combination of the Italian and the German bank.
“If European banks could operate across borders with ease, channeling capital to where it is needed most, I am convinced that we would see a burst of private sector growth and a new wave of business investment and innovation,” Orcel said at the event on Tuesday.
“Just as we at UniCredit have found a balance between Italian roots and becoming a true federal, pan-European group, Europe itself must strike a balance between national identity and continental unity,” he said.
–With assistance from Iain Rogers.
(Adds another Orcel quote in penultimate paragraph.)
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